Offer to make payments? I'd question the collection fees... that's a bit steep don't you think? Are they court papers or just a nasty letter from an attorney??? If it's just an attorney letter, you may still have some leverage for a payment plan. (even a court would allow that)
See if you can negotiate for the amount of the actual bill by offering to make it a quick payoff (say a few months time) in lieu of them dropping the collection fee. And it's good that this is all in writing...better for both of you, but remember signing anything is a commitment to what you sign, so make sure the terms are what you want or can handle before taking that step. I think if you offer to pay the old balance quickly, as a good faith effort, they may void the collection fee or at least reduce it.